Transcript Slide 1

Invest Today with Tomorrow in MindTM
Turning Actionable Tax Ideas into a Lifetime of Advantage for Your Clients
HARNESS THE
POWER OF
COMPOUND
GROWTH
OPTIMIZE
TAX-DEFERRED
INCOME
PROTECT THE
TRANSFER OF
WEALTH
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Introduction
When Asked What is Most Important
to Clients…
The answers consistently given are:
1
Capital Preservation
2
Growth
3
Tax Minimization
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Introduction
Large Market and Inefficient Investments
 Pre-retirees and retirees represent a “sweet-spot”
 People aged 55 and up control 80% of
investable assets1
Total Investable Assets
Age: 16-30
1%
Age: 30-55
19%
Age: 70+
27%
 Many are in highly taxed investment vehicles
 Over $730 billion sitting in GICs, certificates
of deposits and other savings accounts2
 $121 billion in fixed income mutual funds3
Age: 55-70
53%
 $19 billion in Canada Savings Bonds4
Sources: 1Capgemini, The Canadian Wealth Management Market 2004/2005, 2Investor Economics 2005
Household Balanced Sheet Report, 3IFIC September 2006, 4Government of Canada, Debt Management
Strategy, April 2006
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Introduction
Not All Cash Flows are Taxed Equally
Interest / Income
You
keep
53.6%
Tax
paid
46.4%
Dividends
You
keep
68.7%
Tax
paid
31.3%
Capital Gain
You
keep
76.8%
Inefficient
cash flow
Tax
paid
23.2%
Return of Capital
You keep
100%
(taxes are
deferred)
Efficient
cash flow
Assumes a marginal tax rate of 46.41%, top rate for Ontario; non-eligible dividends
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Introduction
What is Invest Today with Tomorrow in Mind™?
 Understanding how decisions made today will impact your
clients throughout their accumulation, decumulation,
and wealth transfer phases of life
 Focusing on how long-term tax efficient and tax effective
investment strategies impact your clients’ overall wealth plan
 Protecting your business from the inevitable impact
of your clients’ RRIF drawdown and general tax erosion
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Actionable Strategies
Harness the Power of Compound Growth
Using Corporate Class to Get Your
Client’s Assets Working Harder
 Flexibility to change
investments without incurring a
taxable event
 Benefit from compounded
growth
 Keep your client’s assets
invested in a lower tax bracket
for life
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Actionable Strategies
How Does Corporate Class Work?
Change investments as your client’s life changes
under a tax deferred structure
 Defer taxes on capital gains when switching between
investments
 Enables a lifetime of flexibility
Corporate Class
Fund A
Fund B
Fund C
Fund D
Fund E
Fund F
Fund G
Fund H
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Actionable Strategies
Corporate Class in Action
During the Accumulation Phase
Your client keeps $183,721 more on their $100,000 investment!
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
-
Using Corporate Class:
$826,695
The
Difference:
$183,721
Not Using Corporate Class:
$642,974
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Funds:
TGF
TISF
BCEF
FTBGP
Investment
Dates:
1986-90
1991-96
1996-02
2002-06
Taxes*:
$10,257
$45,024
$42,753
n/a
Total
$98,034
*Capital Gain taxes are paid by Non-Corporate Class investors when switching between funds
Source: Globe HySales and Franklin Templeton, January 1, 1986 to March 31, 2006
To simulate the Corporate Class returns for pre-inception periods, annual Series A returns of the Funds were reduced
by 22.5 BP (capital tax charges on Corporate Class), BCEF Series F returns were reduced by 169BP (actual return
difference between series A and Corporate Class) Assumes: dividends reinvested, all taxes paid MTR 46.41%.
Assumes investment on Jan.1 of the year shown and switch on Dec.31 of the year shown, excluding Franklin
Templeton Balanced Growth Portfolio where the switch was not made and is indicated as n/a.
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Actionable Strategies
Corporate Class in Action
During the Decumulation Phase
Your client gets 30% more After-Tax Income
After Tax Income
$60,000
Amount
invested:
$50,000
Corporate
Class:
$826,695
$40,000
Series A:
$642,974
$20,000
Total After Tax
Income:
In Corporate
Class: $1,034,003
30% More
After Tax
Income
$30,000
In Series A: $792,280
$10,000
21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
Year
Series A
Corporate Class
Scenario assumes effective tax rate is 27.94%. Marginal tax rate of 46.41%, 8% return per year,
withdrawing 8% of income per year. The 8% return is hypothetical and for illustration purposes only, actual
fund returns may differ.
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Actionable Strategies
Corporate Class in Action
At the Transfer Phase
Your client benefits by a total of $377,274
$241,723
More Income
$1,034,003
$135,551
More Asset Value
$639,839
$792,280
$504,288
Cash Flow Received
Wealth at Transfer
(over a 20 year period)
(At year 40)
Capital gains tax paid at year 40 is $186,856 on $826,695 for the Corporate Class Investment and $138,686 on
$642,974 for the Series A investment. Assumes both are redeemed at the end of year 40. Net amount after all capital
gain taxes paid
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Actionable Strategies
Application #1
Clients looking for a core investment solution that evolves
with their risk tolerance and life stages.
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Actionable Strategies
Quotential and Corporate Class
 Benefits:
 Switch among 7 fully diversified portfolios
 Address your clients’ risk profiles throughout their life stages without
triggering a taxable event
 Defer tax event until client is in lower tax bracket
 Benefit from compounded growth
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Actionable Strategies
Application #2
Individual and corporate clients seeking preferential tax
treatment on their fixed income investments.
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Actionable Strategies
Preferential Tax Treatment on Fixed Income
Investments
Corporate Class Tax Shelter
 For Individual Clients:
 Beneficial for short-term transitory
assets. Clients can hold investments in
Corporate Class without triggering
taxes
 Ideal tax efficient income for clients who
are approaching or are in retirement.
Income investments are drawn down
through a SWP and are in the form of
capital gains
Managed
Yield
 For Corporate Clients:
 Capital gains have better tax treatment,
allowing a corporation to bank any
losses to reduce tax liability
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Actionable Strategies
Application #3
Clients looking to complement their RRSP
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Actionable Strategies
What About RRSPs?
RRSP
Non-Registered
Tax Deduction
Tax deduction (with loan)*
Retirement Savings
Retirement savings
Tax-deferred flexibility
Tax-deferred flexibility (with Corporate Class)
Maximum annual contribution
No maximum contribution
of $19,000
Upon Decumulation…
RRSP
Non-Registered
Full amount is taxed as income
Cash flow is generally taxed as capital gains***
Forced to redeem at 69**
No forced redemption
*Interest may be deductible if certain criteria are met. Speak to your tax adviser about your specific situation. **Required to either
redeem at 69 or rollover into a RRIF. ***Distributions may be taxed as income
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Actionable Strategies
Corporate Class vs. RRSPs
In Accumulation
A $45,762 difference after 20 years after tax!
Monthly Contribution/
Payment
Corporate $50,000 loan invested in
Class Loan Corporate Class Funds
with a monthly interest
payment of $250*
RRSP
PAC**
$250
After 20 Years…
$233,048
($50,000) loan principal
= $183,048
$137,286
*For demonstration purposes only. Assumes the RSP and Corporate Class investments both grow at 8% annually and the $50,000
loan is an interest only loan with a rate of 6% with a marginal tax rate of 46.41%. Interest payment is deductible only if all
conditions are met. Investor should talk with their tax advisor to discuss their specific situation. **A pre-authorized contribution
(PAC) plan allows you to invest a specific amount of money at regular intervals.
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Actionable Strategies
Corporate Class vs. RRSPs
In Decumulation
Corporate Class
$18,644 pre-tax cash flow per year
$3,232 in taxes per year (taxed as
$183,048
Over 20 years
RSP
51% More/Year
capital gains)
$15,412 after-tax cash flow per year
$13,983 pre-tax cash flow per year
$137,286
$6,490 in taxes per year (taxed as
interest income)
$7,493 after-tax cash flow per year
For demonstration purposes only. Assumes the RSP and Corporate Class investments both grow at 8% annually and the $50,000
loan is an interest only loan with a rate of 6% with a marginal tax rate of 46.41%.
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Actionable Strategies
Tools
Show the Benefits of Corporate Class to Your Clients
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Actionable Strategies
Summary of Corporate Class
 Choose from a wide range of investment solutions
 7 Quotential Portfolios: Canada’s #1 Managed Program
 27 Individual Mutual Funds
 Benefit from compound growth – Your clients will have more
$$ for retirement and more $$ for their estate
 Defer taxes until your clients are potentially in a lower tax
bracket = more money in their pocket
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OPTIMIZE
TAX-DEFERRED
INCOME
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Actionable Strategies
Optimize Tax-Deferred Income
Using Series T to Put More Money In Your Client’s Pocket
 Flexibility to structure income around
a clients’ specific requirements
 Provide high, predictable cash flow while
ensuring the lowest tax bracket on
investment returns
 Continue to grow your clients’ assets
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Actionable Strategies
How Does Series T Work?
Using the power of ROC, Series T allows your clients to defer
capital gains tax until later and enjoy a higher cash flow now
Market Value
Value
Original ACB
The ACB is lowered by each
monthly distribution. If units
are sold, the market value
minus the current ACB is taxed
as a capital gain.
Declining ACB
Time
Sample Monthly RoC Distribution
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Actionable Strategies
Customize Your Cash Flow
Switching between Series T and Series A of the same fund or
portfolio is not a taxable disposition. This allows you to fine-tune
your clients’ cash flow.
A
T
8% targeted distributions are not guaranteed and may change at the discretion of Franklin Templeton Investments.
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Actionable Strategies
Series T in Action
During the Decumulation Phase
Give Your Clients 16+ Years of Tax Deferred Income*
Initial Investment in Series T
$600,000
16 2/3
years
Gives you:
$36,000/year
(tax deferred)
Ending
Value:
$1,017,003
* Assumes 8% annual growth with 6% annual Return of Capital. Returns are hypothetical and for illustration purposes
only, actual fund returns and target distributions may differ.
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Actionable Strategies
Series T in Action
At the Transfer Phase
A higher net value to your client’s Estate
 Total cash flow over 16 2/3 years: $600,000
 Total Market Value: $1,017,003
 Taxes Payable at the end of 16 2/3 years: $235,995
 Net After-Tax Value: $781,008
Total Value to Client over 16 2/3 years: $1.38 million
* Assumes 8% annual growth with 6% annual Return of Capital and assumes a tax rate of 46.41%. Returns are
hypothetical and for illustration purposes only, actual fund returns and target distributions may differ.
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Actionable Strategies
Applications for Your Practice
Series T is suitable for:
 Clients looking for regular, tax efficient income through an
investment vehicle that can weather different market
environments
Also Consider Series T for:
 Risk averse clients seeking income and estate preservation
 Clients facing an Old Age Security (OAS) clawback
 Philanthropic clients planning to give some of their investment
to charity
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Actionable Strategies
Looking for Income
and Estate Preservation?
The best of both worlds…
GIC
Initial
Investment
Annual ROR
Series T
$500,000
$500,000
5%
5%
Return
$25,000 gross
$25,000 net**
Minus
($11,602 taxes*)
($7,500***)
= $13,397 net
= $17,500 net
+ $500,000
Insurance Policy
What’s Left
in Your
Pocket?
*Assumes a tax rate of 46.41%. **Assumes no income distributions and no capital gains distributions ***For demonstration
purposes only. Series T Example: Client purchases $500,000 last to die insurance, Cost is based on the average cost of
insurance for a 65 year old couple based on Equitable Life Insurance rates. Mutual funds are not guaranteed, their values
change frequently and past performance may not be repeated. Unlike GICs, mutual fund securities are not covered by the
Canada Deposit Insurance Corporation or by any other government insurer. Assumes that Series T is continued to be held.
Taxes will be payable if investment is redeemed.
Approximate
annual cost
to purchase
$500,000
Last to Die
Insurance
Policy
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Actionable Strategies
Clients Fighting the OAS Clawback
Don’t let your clients miss out on potentially $4,152 extra cash a year*
 Transfer client’s interest-bearing securities worth $100,000 into a Series T fund
with an 8% pre-tax ROC distribution1
 OAS clawback is reduced by $1,200 and taxes are potentially reduced by $2,952
 Client’s total annual after-tax cash flow increases from $58,912 to $63,064*
$64,000
$63,000
$62,000
$61,000
$60,000
$59,000
$58,000
$57,000
$56,000
Bonus Cash Flow from OAS Clawback Reduction
Bonus Cash Flow from Tax Savings
Keep more of your OAS using Series T funds
– OAS Clawback reduced by $1,200
Put more money in your pocket
– Taxes reduced by $2,952
After Tax Flow from using Regular Funds
1 8%
targeted distributions are not guaranteed and are subject to change at any time. Tax rate of 32.98% is
assumed based on a client’s gross annual income is $70,000 from pension. The 2006 threshold for OAS
Clawback is $62,144.
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Actionable Strategies
Client Seeking to Reduce Taxes
through Charitable Giving
Donating Series T in-kind gives your client a tax
advantage of $27,180 over a cash donation*
 Scenario 1: Redeem Series T and donate its net value in cash
$100,000
($18,564)
$81,436
$19,230
$40
 Scenario 2: Donate Series T in kind at full market value
$20




Ending market value of units :
Taxes on capital gains:
Your donation receipt+:
Total Tax Reduction
$K
 Your donation receipt:
 Gross tax benefit of the receipt:
 Your capital gains taxes:
 Tax credit from receipt and total
Tax reduction:
$100,000
$46,410
($0)
Tax Reduction from
Donation
$50
$30
$10
$-
Cash
Donation
In-kind
Donation
$46,410
*Based on a $100,000 donation,+ tax credit receipt from $37,794. Assumes a tax rate of 46.41%
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Actionable Strategies
Tools
Show the Benefits of Series T to Your Clients
Dealer Use Only
Invest Today with Tomorrow in MindTM
Turning Actionable Tax Ideas into a Lifetime of Advantage for Your Clients
HARNESS THE
POWER OF
COMPOUND
GROWTH
OPTIMIZE
TAX-DEFERRED
INCOME
PROTECT THE
TRANSFER OF
WEALTH
Dealer Use Only